Leading Organizational change

MCDONALDS STORY FROM CHAPTER 1

A McDonald’s Change Story: Responding to Pressure Imagine eating nothing but McDonald’s for a month. Morgan Spurlock, independent film- maker, did just that, restricting his diet with the following limitations:

No food or drink other than McDonald’s menu items.

Meals supersized when given the option.

Every item on the menu had to be eaten at least once.

Spurlock spent one long month traveling across the United States interviewing various community groups about the implications of eating fast food and using himself as a guinea pig.71 Before embarking on this journey, Spurlock underwent a full medical examination and was deemed to be a physically healthy man. One month later, the diagnosis had changed.72 After three square McDonald’s meals a day for 30 days, Spurlock had gained 25 pounds, his cholesterol level had jumped from 168 to 230,73 and his liver was in a state that an alcoholic would have envied.74 The result of this personal experience was a documentary called Super Size Me, an entrant in the 2004 Sundance Film Festival. The aim? Spurlock claims his objective was to uncover the link between foods like McDonald’s and obesity,75 a correlation that the company had long denied.76 Nevertheless, the film’s release coincided with the launch of McDonald’s new Happy Meal for adults, comprised of a salad, a bottle of water, and a “stepometer.” Despite valiant attempts by McDonald’s to counteract the claims of the film, Super Size Me became one of the five biggest-grossing documentaries in American history.77 Highlighting health issues related to fast food has only added to other worldwide pressures on McDonald’s operations. Externally these include an epidemic of mad cow disease, foot-and-mouth disease, the SARS epidemic in the Asia-Pacific region, a fall in economies leading to weaker foreign currencies, and high commodity costs.78 Internally these problems were compounded by McDonald’s aggressive international expansion strategy that made future growth more difficult.79 As the then-CEO, James Cantalupo, admitted, “we took our eyes off our fries and paid a price.”

The problems that the company faced went beyond superficial fluctuations in sales and revenue. The year 1996 was a turning point, with McDonald’s experiencing four consecutive quarters of declining sales and beginning to lose market share to competitors such as Wendy’s and Burger King.81 Jack Greenberg, the former CEO, implemented the highly unsuccessful “Made for You” kitchens with disastrous results.82 The result was slower service in contrast to its aim of flexibility with new menu items.83 Franchisees became frustrated. Take Paul Saber. For 17 years, he was a McDonald’s franchisee, but in 2000 he recognized the lack of fit between the product offerings at McDonald’s and consumer tastes. “The McDonald’s-type fast food isn’t relevant to today’s consumer,”84 he commented as he sold his 14 stores back to the company. Others stuck it out with McDonald’s. Richard Steinig remembers getting a 15 percent profit from the $80,000 sales at his two stores in the 1970s.85 This was quite a comfortable income given that the minimum wage was less than $2 an hour.

By 2003 he was struggling to make ends meet. Even the $1 menus advertised worldwide resulted in a loss for Steinig: as he said at the time, “we have become our own worse enemy.”86 Getting Back to Basics In 2003 Cantalupo was brought in to rectify the declining state of the organization.87 He previously held the position of vice chairman and headed McDonald’s international expansion. His vision for the organization’s future was in a “back to basics”88 approach with organizational changes to refocus the organization on core values of quality and service. However, Cantalupo died in 2004 of a heart attack and his successor, Charlie Bell, left soon after (and subsequently died from cancer). In 2004 Jim Skinner took over as CEO.

As part of the new strategy called “Plan to Win,” new store openings were cut back.90 The aim was to increase sales from existing sites instead of growth through a rapid implementation of new stores.91 For example, in 2004, 300 new stores were proposed, in comparison to 1995, when 1,100 new restaurants were opened.92 There was also a complete overhaul of the advertising campaign. By introducing the “I’m lovin’ it” slogan and commercials featuring pop singer Justin Timberlake,93 the hope was to reinvent the company’s image and connect it with the younger generation.94 Another part of the revitalization of the McDonald’s business was the introduction of the new salads menu.95 McDonald’s, in the past, had expressed little concern at the claims that its products are directly linked to obesity, but some critics saw the launch into the “fresh salads” menus as a sign that the unhealthy reputation of fast foods may have been identified internally as a threat to the organization.96 This new menu has helped to draw in female customers who had previously been reluctant to dine at their restaurants97 and increase the number of customers during the evening.98 In the past, McDonald’s had tried creating low-fat menu options for their patrons with the McShaker salads and McLean Deluxe burger, but with limited success.99 Now, responding to external pressures, customers are given healthier and tastier menu options.100 One of McDonald’s newer goals is “loved by kids, approved by moms,” focusing their nutritional efforts on these two key customer groups.101 Franchisees in Colorado, for example, have joined forces to intro- duce “Smart Meals”—actively promoting meal combinations that meet specific nutritional standards and include two Happy Meal options for children.102 Other franchisees have revamped their PlayPlace, the traditional children’s play area, by introducing the R Gym, encouraging physical coordination and aerobic activity.10

McDonald’s also implemented an online training program for all U.S.-based employees to address customer service issues.104 The aim was to bring the company back on the road to providing the basic, speedy service and quality products that it became famous for so many years ago. Together, these changes reflect the company’s most recent “better, not just bigger” mantra to bring the company back in touch with its customers.105 By 2007 this seemed to be working, with the company declaring some of “its strongest business results in 30 years.”10

REFERENCES:

Palmer, I., Dunford, R., & Akin, G. (2009) Managing organizational change: A multiple perspectives approach (2nd ed.). New York: McGraw Hill.